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Holidays on credit card: not a good idea

In a world where everything is always moving fast and/or where our schedules are overloaded, we often equate summertime vacation time. Whether as a family, as a couple, or solo, during the summertime we often daydream about holiday destinations of all kinds to decompress and rediscover ourselves. Since money may not have been put away over the past year for a vacation, consumers often rely on their credit cards to pay for their trips.

Credit in all its forms can be a great way to fund your trip for your next vacation, including insurance, reward points, and so on. Credit cards are an easy way to book your trip or accommodations, bring most destinations within our reach, and are a quick solution to give you a few days of relaxation far away from the everyday. That said, is paying for vacation on credit a good deal or a bad idea?

The fallout of paying for a vacation on credit

Using your credit card to book your travel and accommodation is a good idea… if you have enough savings to completely pay off the balance when you receive your bill at the end of the month. However, this is not the case most of the time. It goes without saying that a credit card comes with a high interest rate. The longer you have a balance on your credit card, the more interest you will have to pay. For example, a trip to the Caribbean costs about $2000 per person. It would take a person paying only the minimum balance on their credit card an average of 30 years to pay off their trip, which would eventually cost them almost three times its value in interest alone. Bad idea? Most probably! Even if you pay it off in just a couple years, the accumulated interest is not really worth it when you already need to tighten your purse strings.

It is true that you will benefit from your vacation to decompress and that you probably won’t be thinking about how your trip will impact your budget. However, returning from vacation can be brutal. Consumers who were in debt before going on vacation may be significantly more stressed and in debt upon their return. It is especially important to remember that unexpected problems may arise not only during vacation, but also upon your return home! Nonetheless, it is still possible to enjoy some vacation time despite being in debt, without necessarily resorting to credit cards.

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Taking vacation even when you’re in debt

There are many low-cost options for vacation: all you have to do is take advantage of the opportunities already available to you. Obviously, the best way to pay for your dream vacation is to save enough money to pay for it, instead of travelling on credit cards. Saving just $10 dollars from each paycheque can take you further than you think!
In the meantime, you have many options for low-cost vacations:

  • Relax at home
  • Do activities outdoors: go to the park, the pool, the beach, hiking trails, etc.
  • Use Airbnb and other accommodation exchange and rental platforms
  • Take advantage of coupons and discounts for activities, available online
  • Drive instead of flying for travel
  • Explore the area where you live
  • Visit friends or family
  • Go to the family cottage
  • Go camping instead of booking accommodations
  • And more!

As you can see, a person with debt can still go on vacation. All you need to do is choose activities that suit your budget and interests.

What is clear is that the key to a successful, debt-free vacation is to make a budget. It is your best tool to determine what you can allow yourself, both in planning your vacation and during it. If you don’t know where to start in making a budget and saving money for your next vacation, talk to one of our Ginsberg Gingras advisors. They can help you reach your vacation goals!

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